FBAR – U.S. TAXPAYER REPORT OF FOREIGN BANK & FINANCIAL ACCOUNTS – FORM TD F 90-22.1

June 8, 2010 · Posted in IRS Problems · Comments Off 

On April 2, 2009, the IRS announced they will reduce the penalty for not filing a Report of Foreign Bank and Financial Account, known as a FBAR Form.

The current penalty is up to fifty percent (50%) of the highest annual balance of each account for each of the last 3 years.  The 50% penalty is imposed annually.  After 2 years of the 50% penalty, the account can be “wiped out” and the investor may still owe taxes (and interest).

The IRS announced they will not generally prosecute Taxpayers who come forward voluntarily, provided they are not drug dealers, arms merchants or others with “ill-gotten gains”.

The IRS will not asses a 35% penalty (due under Form 3520) on money secretly transferred to foreign trusts (i.e., tax evasion).

The IRS will reduce the penalty to 5 to 20%, depending in part on whether the wealth was inherited.  The IRS will levy the penalty just once, on the highest balance in the accounts over the last 6 years.

Under the IRS plan, Taxpayers will be required to pay any taxes and interest owed over the last 6 years.  The IRS will assess either the standard, accuracy-related penalty of 20%, or a 25% penalty for filing tax returns later.  Taxpayers in the program must also file amended tax returns for up to the last 6 years.

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